Sustainable

Finance

“For an ADI to be sustainable, it must take into account the social and environmental impacts of its

investments and loans”.

 

Gen Advisory Pty Ltd, 

September 2019.

The term “Sustainable Finance” refers to banking practices that integrate “environmental, social and governance” (ESG) criteria. It prioritizes ESG benefits as a key objective.

 

Unlike “traditional/conventional” banking, which is based on a two-dimensional risk and return analysis, Sustainable Finance considers three dimensions: risk, return, and impacts.

 

Gen Advisory’s prediction is that the future, ADIs, and FinTechs will no longer differentiate between “traditional” and “sustainable finance”. When the science on Sustainable Finance has progressed sufficiently, there will only be one form of finance – Sustainable Finance.

At a Glance

Common sustainable banking strategies

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Sustainable Lending

Microfinance

Green Bonds

Impact Investing

Sustainable Funds

Our Analysis

What Is It?
The Future
Opportunities
Key Issues
Threats

Banking which integrates “environmental, social and governance” (ESG) criteria and prioritizes ESG benefits as a key objective.

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Traditional banking is based on a two-dimensional risk and returns analysis. With sustainable finance, three dimensions are considered: risk, return, and impacts.

Gen Advisory’s view is that there will eventually no longer be a distinction between “traditional” and “sustainable finance”. By definition, all banking will need to be sustainable. 

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Climate risk will no longer be viewed as a merely moral/ethical issue, but also a financial one.

Current issues in Sustainable Finance: 

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Lack of universally-accepted metrics for measuring ESG benefits. 

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Lack of certainty regarding how to incorporate ESG criteria into credit lending decisions.

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Competing priorities

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Inadequate budgets.

  • New/increased pool of investors 

  • Improved brand Value 

  • Improved regulatory engagement

  • Reduced costs 

  • New Products/ Services 

  • New Client Segments

  • New Geographic Markets 

  • Employee Retention

Gen Advisory’s view is that ADIs and FinTechs which do not eventually adopt sustainable financing practice will face an existential threat.

How we can help ADIs and FinTechs incorporate ESG criteria

  • Provide strategic advice to ADIs and FinTechs on the latest development and insights on Sustainable Finance - including how ADIs and FinTechs can incorporate ESG criteria into their credit lending decisions.

  • Deliver bespoke research on a specific Sustainable Finance or ESG-related area of interest.

  • Deliver bespoke training on Sustainable Finance and ESG, tailored to the ADI's and FinTech's needs.

  • Manage and executing, on an ADI’s and FinTechs behalf, a project to incorporate Sustainable Finance and ESG. 

  • Conducting due diligence on prospective solutions providers.